Quirky assets OK’d for sale

Quirky Inc.’s assets have been approved for sale, less than two years after the much-touted company’s move to Schenectady.

A New York judge authorized the sale of remaining Quirky assets to Q Holdings LLC on Thursday. The company filed for Chapter 11 bankruptcy in September.

Q Holdings said it would pay $4.7 million for Quirky’s intellectual property and inventory, according to a Nov. 17 auction transcript. Q Holdings, headquartered in the Netherlands, is a privately owned investment company.

In Thursday’s court documents, Judge Martin Glenn of the Southern District of New York found Quirky complied in all respects with bidding procedures. The ruling came despite objections, including those from creditors alleging that the asset sale moved too quickly.

General Electric Co., one of Quirky’s major backers, also objected to the sale. GE had asserted Quirky should not be able to sell inventory containing a GE trademark or brand.

In response, Quirky said in documents filed earlier this month that this allegation showed that GE conflated trademarked inventory with licensing agreements, and so it was “not barred from selling such inventory” after the asset sale.

In 2014, Quirky promised 180 new jobs in Schenectady and said it would help the city draw in other high-tech players as it supported the company’s appliances that could be programmed remotely by a mobile device.

The company moved to Schenectady to be near GE’s research lab in Niskayuna.

By last summer, however, Quirky said it had spent much of its money from backers. As of August, the company had $136 million in liabilities and $53 million in assets.
“It’s sad — it’s kind of the way of the world these days, however, that you have a startup like this that arrives in Schenectady with great promise and prospect, and unfortunately most of them don’t work out,” said Bob Rock, head of Tully Rinckey PLLC’s bankruptcy practice.

Startup companies must have a close focus on profitability, not just product lines, to stay successful, he said.

On Dec. 2, GE said in court filings that Quirky damaged GE’s reputation and trademark because it did not maintain customer support for GE co-branded products.
“We found the Quirky experience good for our brand, but with the bankruptcy it would not have the same protections that GE had when Quirky was operational,” said GE corporate spokeswoman Jennifer Erickson. “As such, GE filed its objection to the sale of certain GE co-branded inventory to protect its trademark and reputation, as well as GE’s and Quirky’s customers.”

Quirky and Q Holdings did not respond to requests for comment, nor did an attorney for Q Holdings.

]]>http://www.tullylegal.com/albany-ny/articles/judge-gives-quirky-approval-over-objections-by-ge-one-of-startups-backers/feed/0Business Bankruptcy Trends in 2015: What Business Owners Should Expecthttp://www.tullylegal.com/albany-ny/articles/business-bankruptcy-trends-in-2015-what-business-owners-should-expect/
http://www.tullylegal.com/albany-ny/articles/business-bankruptcy-trends-in-2015-what-business-owners-should-expect/#commentsMon, 26 Oct 2015 17:20:31 +0000Tully Rinckey PLLChttp://www.tullylegal.com/albany-ny/?p=21032Business bankruptcy filings down By Michael Petro The number of bankruptcies going down is a common theme in today’s economy, not only in Western New York but across the state and nationally. The trend is seen in both commercial and …

Business bankruptcy filings down

The number of bankruptcies going down is a common theme in today’s economy, not only in Western New York but across the state and nationally.

The trend is seen in both commercial and consumer bankruptcies, though different economic forces affect each of them.

Chapter 11 bankruptcies, especially, have slowed in recent years, according to local attorneys. These bankruptcies, which occur when a business wants to reorganize or sell, tend to be a function of the economic times, and the economy is constantly changing for the better or worse, said Garry Graber of Hodgson Russ LLP in Buffalo.

They slowed for a number of reasons, including an improving economy and low interest rates, he said. Even the more marginal businesses are able to service their debt and hang on, he added.

Graber has more than 35 years of experience in practicing law involving bankruptcy, corporate restructuring, creditors’ rights, financial services, commercial and corporate litigation and business. He has a role in virtually every large Chapter 11 case filed in Upstate New York and many filed in the Southern District of New York and Delaware, where many cases are filed because the majority of corporations are incorporated there and the district offers a level of experience and consistency in big cases.

Because the bankruptcy practice is national, he travels often. Most courts will allow attorneys not admitted to practice in the state where the bankruptcy court is located to be admitted for purposes of hearing a particular case.

He is also an adjunct professor at SUNY Buffalo Law School and teaches Chapter 11 bankruptcy.

Said Graber: “It’s still slow compared to how it’s been in various times in recent economic phases, but I would also say it will pick up as soon as the economy hits a couple of speed bumps or in the event that another bubble occurs in the debt markets.”

Robert Rock, who practices bankruptcy and commercial and corporate law, has focused on Chapter 11 cases since 1982. He said there’s less demand for Chapter 11 these days, however, which is a frequently discussed topic among attorneys when he travels to attend seminars.

Helping to keep the number of cases down are tighter bank lending decisions, said Rock, managing partner in Tully Rinckey’s Albany office.

“You’re not having a situation where a person gets a loan to operate a business without a business plan that’s going to work and may be doomed right off the bat, but they don’t realize how much they are spending to bring in $1 of revenue,” he said. “I have seen those business focused on increasing their revenue, which is great if it cost you 90 cents to bring in a dollar. But if it costs you $1.10 to bring in $1, you just get further and further into a hole.”

Over the last decade or so, Graber said, bankruptcies nationally have been something that pervades industries at certain times. Examples are the meltdown seven years ago of the U.S. auto industry and their suppliers and, before that, airline bankruptcies and problems in the steel industry.

The asbestos industry went through a shakeout that is still going on, including in Buffalo, he said.
There also have been high-profile bankruptcies involving oil and pipeline companies but most of them involve entities operating out of Texas, according to Graber.

Rock said he and his colleagues continue to field calls from startups and other small businesses seeking Chapter 11, including restaurants, but by the time an attorney sits down with many of them, there’s not much to reorganize because the businesses are so far behind in their debt.
Until a few years back, the economy was in such a lull that business owners who typically would have taken a chance in reorganizing were simply walking away, he said.

“They figured that in a bad economy, why spend tens of thousands of dollars on attorney fees and other fees that would accrue during the process? It wasn’t worth the risk,” he said. “Instead they just shut it down and tried something different.”

Attorney Diane Tiveron of HoganWillig said that while the owner of a failed business may decide not to file Chapter 11, he or she is still usually left with personal guarantees and tax obligations from the business.
“We see the aftermath of a business failing,” said Tiveron, managing partner and head of the corporate and business law department. “People usually pull out all of the stops and sign on the dotted line personally to keep the business going, and sometimes when that doesn’t work, they have to face the bankruptcy issue.”

While HoganWillig doesn’t handle Chapter 11 cases, for smaller businesses and sole proprietorships, Chapter 13 can be a useful tool, said Paul Pochepan. He practices bankruptcy law and debt relief and said he has represented clients in a number of such cases. These involve setting up a plan to pay back a percentage of the debt owed in a three- to five-year period, allowing for what’s owed in taxes and credit cards to be consolidated and paid back at lower percentages.

Graber said business bankruptcies have been the called the “toxic waste” of the free enterprise system, but a recent trend has been to use them as a vehicle to sell assets.

Typically, a sale is prearranged, usually at the insistence of the holders of the company’s secured debt. He said bankruptcy is filed for the purpose of selling the assets, which go to a buyer immune to any type of claims.

It can be done through the normal foreclosure process under state law.
Graber said a prime example of this occurred in one of the largest bankruptcies in U.S. history involving General Motors Corp.

“In many respects, bankruptcy has really become a national foreclosure system in which assets are sold expeditiously. On the first day of the GM case, a motion was filed to authorize the sale of the company’s assets to the ‘new’ GM, which had been formed largely through the funding of the federal government,” he said. “And, in fact, those assets were sold to the new entity in less than 60 days. The bankruptcy thereafter was just used to clean up issues related to the assets in credit of claims.”

He added: “That happens more often these days. Bankruptcy tends to just be used as a means to effectuate an acquisition or a divestiture.”

While bankruptcy can serve as a remedy, Rock advises clients that it should be their last option. There are instances where they may be forced to file. For example, a business owner came to Graber the day before the tax man was set to padlock the company. Another time, there was going to be a foreclosure sale of property essential to a business.

“At that time, you probably have to file,” he said.

What Rock tries to examine with a client before filing is their exit strategy out of Chapter 11. He asks: “What is your business plan? How will you pay off creditors? How will you continue being able to operate?”

If a large corporation has explored an acquisition of his client, he recommends speeding up that process to see if a transaction can be made sooner so as to avoid filing Chapter 11, which could depress the price the buyer may be willing to pay.

He also suggests that if a new lender recently moved into the area and is aggressive in pursuing accounts, a client should investigate that option for access to money, albeit at a higher interest rate.

Graber expects the trend of fewer bankruptcy filings to come to an end at some point, saying, “When the economy changes for the worse, it tends to cause more bankruptcies and more fallout.”

]]>http://www.tullylegal.com/albany-ny/articles/business-bankruptcy-trends-in-2015-what-business-owners-should-expect/feed/0Change in How Military Views PTSD Dischargeshttp://www.tullylegal.com/albany-ny/articles/change-in-how-military-views-ptsd-discharges/
http://www.tullylegal.com/albany-ny/articles/change-in-how-military-views-ptsd-discharges/#commentsMon, 05 Oct 2015 14:04:04 +0000Tully Rinckey PLLChttp://www.tullylegal.com/albany-ny/?p=21013Ask the Lawyer: after-discharge PTSD diagnosis Q. I received an other-than-honorable discharge years ago. I served in Vietnam and was diagnosed with post-traumatic stress disorder after I was discharged. Can I get my OTH upgraded? A. There has been a …

Ask the Lawyer: after-discharge PTSD diagnosis

Q. I received an other-than-honorable discharge years ago. I served in Vietnam and was diagnosed with post-traumatic stress disorder after I was discharged. Can I get my OTH upgraded?

A. There has been a sea change in how the military views post-traumatic brain disorders, affording many Vietnam veterans their best shot at upgrading less-than-honorable discharges prompted by factors related to this condition. Consequently, Boards for Correction of Military and Naval Records are now more attuned to applications from Vietnam veterans seeking discharge upgrades. Indeed, in 2014, former Defense Secretary Chuck Hagel issued guidance to the military records correction boards to give “[l]iberal consideration” to petitions from veterans seeking discharge upgrades whose service treatment records indicate symptoms of PTSD.

What’s more, just because a Vietnam vet’s service record doesn’t mention PTSD, doesn’t mean a correction board can ignore indications that such a condition existed at the time of discharge. The 2015 Defense Authorization Act directs that correction boards have a member who is a clinical psychologist or psychiatrist, or a physician “with special training on mental health disorders,” when reviewing applications from vets who suffered from a mental health disorder while serving and are seeking to upgrade a discharge.

But just as a PTSD diagnosis can’t automatically save a service member from a court-martial conviction, that diagnosis will not automatically compel a correction board to upgrade an adverse discharge. You still must prove that the adverse discharge resulted from an error or injustice.

In a 1999 case, the Board for Correction of Naval Records refused to change the “under honorable conditions” discharge of an applicant who had served in Vietnam in 1971 and was diagnosed with PTSD decades later. While serving, he had received five nonjudicial punishments and his conduct and proficiency averages were below requirements for a fully honorable separation. Veterans Affairs Department medical records also showed he had a long-term heroin addiction. The board concluded: “While PTSD and drug addiction may be considered mitigating factors, neither excuses misconduct.”

In contrast, in a 2003 case, the Air Force Board for Correction of Military Records granted relief to an applicant who had received a bad-conduct discharge for submitting false travel vouchers with a total value of less than $900. The conviction came years after he had served as a medical photographer for air crashes in Vietnam. He was later hospitalized for PTSD, which was attributable to his former job.

The board noted that on top of a record showing he had served 17 years of generally excellent duty and had accepted responsibility for his misconduct, the stress created by his duties “was clearly mitigating.” As such, the board recommended upgrading his discharge to general (under honorable conditions).

Vietnam veterans who have PTSD and are interested in receiving a discharge upgrade should consult with a military law attorney. An attorney can help establish to a BCMR or BCNR that the veteran’s discharge was the product of an error or injustice that was connected to their PTSD.

Mathew B. Tully is a veteran of the wars in Iraq and Afghanistan and founding partner of Tully Rinckey PLLC (www.fedattorney.com). Email questions to askthelawyer@militarytimes.com. The information in this column is not intended as legal advice.

]]>http://www.tullylegal.com/albany-ny/articles/change-in-how-military-views-ptsd-discharges/feed/0Ask the Lawyer: Small Businesses and New Overtime Regulationshttp://www.tullylegal.com/albany-ny/articles/ask-the-lawyer-small-businesses-and-new-overtime-regulations/
http://www.tullylegal.com/albany-ny/articles/ask-the-lawyer-small-businesses-and-new-overtime-regulations/#commentsMon, 17 Aug 2015 13:49:54 +0000Tully Rinckey PLLChttp://www.tullylegal.com/albany-ny/?p=20998Mathew Tully’s Ask the Lawyer column: Preparing for new overtime regulations Question: I own a small business. What do I need to do to prepare for the new overtime regulations the Obama administration has proposed? Response: The Fair Labor Standards …

Question: I own a small business. What do I need to do to prepare for the new overtime regulations the Obama administration has proposed?

Response: The Fair Labor Standards Act (FLSA) and the New York Labor Law (NYLL) have long been the bane of employers. These laws require all employees who do not fall within very limited exemption categories to receive overtime pay for hours worked exceeding 40 hours per workweek. From the complexities involved in determining who is and is not exempted from these laws to the inordinate awards employees can receive through litigation, countless employers have struggled with the FLSA and NYLL.

That struggle will only get harder with the U.S. Department of Labor’s proposed FLSA regulations that were published in the Federal Register on July 6. When those regulations become official sometime after a public comment period ends on Sept. 4, many employers will have to undergo significant restructuring and hiring, pay cutting, and work shifting.

The impetus for this restructuring will be the upward adjustment of the income threshold for overtime exempt employees. Under the proposed regulations, the income threshold will go from $23,660 per year, or $455 per week, to $50,440 per year, or $970 per week, in 2016. That means if an employer has any exempt employees, such as retail store managers, making more than $455 per week but less than $970 per week, they would have to receive a raise to $970 for him or her to continue to qualify as exempted from the FLSA and remain ineligible for overtime, otherwise the employee must be paid time and a half for every hour worked above forty each week.

Few employers are going to be able to provide such raises to all exempt employees with salaries around the current income threshold. In some cases, such raises will be unavoidable, and employers will need to go to great lengths to minimize the fiscal impacts of these new regulations.

The first thing employers – from small to large – will want to do is assess which of their employees are classified as exempt from the FLSA and what their income is. If you have any exempt employees making between $455 and $970 per week, identify whether it is economically sound to continue the exempt status. Depending on the circumstances and the amount of hours generally worked each week, you may want to consider giving them the raise to $970 per week. For the other currently exempt employees, consider limiting their hours to 40 per week and hiring part-time workers to make up for the hours worked in excess of 40 hours per workweek by those formerly exempt employees.

Next, you want to make sure your remaining exempt employees are not being bogged down by traditionally non-exempt duties. Remember, you may be paying these exempt employees significantly more money, so make sure they are predominately performing exempt duties. Generally, up to 20 percent of an exempt employee’s work can involve non-exempt duties, such as filing documents and work part and parcel of the exempt duties. Shift as many of those non-exempt duties as possible to non-exempt employees. You may have to consider hiring additional full- or part-time employees if this redistribution of work pushes too many employees over 40 hours of work per workweek.

Again, try to minimize the fiscal impacts of these new regulations – don’t try to avoid them. Under these proposed regulations, violations of the FLSA could result in employee awards of double the amount of back wages they would have received under the current regulations due to the increase in minimum salaries. Additionally, the FLSA provides for 100 percent liquidated damages as a penalty for violations and attorney’s fees awards to a successful plaintiff.

The costs of complying with the law are many times less than the costs of doing otherwise. Employers should consult with an experienced employment law attorney to determine which employees qualify for exempt status. Employees who believe they have been wrongfully denied overtime pay should likewise consult with an experienced employment law attorney who can prepare and file an FLSA lawsuit.

Mathew B. Tully is the author of the Saratogian’s “Ask the Lawyer” column and a founding partner of the law firm Tully Rinckey PLLC in Colonie. Email employment law-related questions to askthelawyer@1888law4life.com. The information in this column is not intended as legal advice.

Tully Rinckey PLLC Names Managing Partners for All Firm Locations

February 12, 2015 – Albany, N.Y. – Updating its management model to handle a continuing streak of growth, Tully Rinckey PLLC has named six managing partners to oversee legal operations at its coast-to-coast office locations.

Since August 2012, Tully Rinckey PLLC has expanded to six offices across the country. The growth began when the firm added a location in Syracuse, NY, in 2012, followed by the opening of the firm’s Buffalo office in January 2013, and the opening of a Rochester office in July 2013. In April 2014, the firm relocated its Washington, D.C. office to a Class A, trophy building at 815 Connecticut Ave., NW, a block from the White House. In June 2014, Tully Rinckey PLLC moved into a newly constructed suite at 5488 Sheridan Dr. in Buffalo some five times larger than its previous location in downtown Buffalo. In September 2014, the firm opened its first West Coast office in San Diego, Calif.

Tully Rinckey PLLC’s exponential growth has necessitated the elevation of key attorneys to newly-created managing partner positions at each office:

In Albany, the firm’s corporate headquarters, Robert J. Rock has been named managing partner.

In Syracuse, Donald E. Kelly has been named managing partner.

In Rochester, Peter J. Pullano has been named managing partner.

In Buffalo, Mary Beth DePasquale has been named managing partner.

In Washington, D.C., Larry D. Youngner has been named managing partner.

In San Diego, CA, Steven L. Herrick has been named managing partner.

This reorganization of Tully Rinckey PLLC’s management structure is part of a plan developed at the beginning of the firm’s latest growth phase to decentralize key management functions and reach new levels of efficiency and client service.

To speak to Founding Partner Mathew B. Tully, or for more information, please contact Charles McChesney at (518) 218-7100 or at cmcchesney@1888law4life.com.

]]>http://www.tullylegal.com/albany-ny/news/tully-rinckey-pllc-names-managing-partners-for-all-firm-locations/feed/02014 Capital Region Bankruptcy Filings Down 42% from Recession-Era Highhttp://www.tullylegal.com/albany-ny/news/2014-capital-region-bankruptcy-filings-down-42-from-recession-era-high/
http://www.tullylegal.com/albany-ny/news/2014-capital-region-bankruptcy-filings-down-42-from-recession-era-high/#commentsWed, 07 Jan 2015 15:39:17 +0000Tully Rinckey PLLChttp://www.tullylegal.com/albany-ny/?p=207552014 Capital Region Bankruptcy Filings Down January 6, 2015 – Albany, N.Y. – Providing further evidence of a strengthening economy, Capital Region bankruptcy filings at the U.S. Bankruptcy Court for the Northern District of New York in Albany last year …

2014 Capital Region Bankruptcy Filings Down

January 6, 2015 – Albany, N.Y. – Providing further evidence of a strengthening economy, Capital Region bankruptcy filings at the U.S. Bankruptcy Court for the Northern District of New York in Albany last year continued to fall from recession levels.

Region-wide bankruptcy filings, including chapters 7, 11, 12, 13, and 15, totaled 2,957 – down 8.7 percent from the previous year and down 42 percent from the recession-era peak of 5,097 in 2009, according to a Tully Rinckey PLLC analysis of court data released Monday.

*Click graphic for higher resolution*

Tully Rinckey PLLC Managing Partner Robert J. Rock, who has practiced bankruptcy in New York State for more than three decades, is available to discuss the following:

The types of financial problems consumers are encountering in the improving economy;

How some debtors are pursuing alternatives to bankruptcy;

Challenges debtors continue to face in achieving a fresh financial start; and

]]>http://www.tullylegal.com/albany-ny/news/2014-capital-region-bankruptcy-filings-down-42-from-recession-era-high/feed/0Founding Partner Mathew B. Tully, Esq. on whether or not an Employee can be Fired for Refusing to Act Illegally.http://www.tullylegal.com/albany-ny/articles/founding-partnery-mathew-b-tully-esq-on-whether-or-not-an-employee-can-be-fired-for-refusing-to-act-illegally/
http://www.tullylegal.com/albany-ny/articles/founding-partnery-mathew-b-tully-esq-on-whether-or-not-an-employee-can-be-fired-for-refusing-to-act-illegally/#commentsMon, 06 Oct 2014 17:39:49 +0000Tully Rinckey PLLChttp://www.tullylegal.com/albany-ny/?p=20672Mathew Tully’s Ask the Lawyer column: Can I be fired for refusing to act illegally? By Mathew B. Tully, Esq. October 6, 2014 Question: Can my employer fire me for refusing to participate in its illegal activities or for …

Mathew Tully’s Ask the Lawyer column: Can I be fired for refusing to act illegally?

By Mathew B. Tully, Esq.October 6, 2014

Question: Can my employer fire me for refusing to participate in its illegal activities or for exposing its criminal dealing?

Response: Most states subscribe to the doctrine of at-will employment under which employers are generally allowed to terminate employees without reason or notice, barring any contract stating otherwise and so long as the employer does not discriminate in its decision making. Some states adhere to this doctrine more strictly than others. In Virginia, for example, under what is known as the “public policy exemption,” employers cannot use the at-will employment doctrine “as a shield…to force their employees, under the threat of discharge, to engage in criminal activity,” the U.S. District Court for the Eastern District of Virginia said in Williams v. Virginia (2012).

New York, however, does not recognize such an exception and as such, employers, generally, may use the at-will doctrine as a shield. “[T]here is no exception for firings that violate public policy such as, for example, discharge for exposing an employer’s illegal activities,” the New York County Supreme Court said in Candella v Banco Indus. De Venezuela, C.A. (2009). However, the Court continued, “New York does recognize a narrow exception to its at-will employment doctrine. Specifically, an employer may not terminate an employee when the employee made its employer aware of an express written policy limiting the right of discharge and the employee detrimentally relied on that policy in accepting employment.” Such a written policy may be found in an employee handbook, but the employer’s right to terminate at-will would not be forfeited if that document contains a disclaimer saying it does not represent an employment contract.

Depending on the circumstances, employees who find themselves working for an employer engaged in illegal conduct may be able to blow the whistle and be protected from retaliatory terminations. As the New York Court of Appeals pointed out in Horn v. New York Times (2003), “the strictures of the at-will doctrine itself, a judge-made doctrine, have been subject to a limited number of statutory exception.” The New York State Labor Law, for example, prohibits health care employers from taking retaliatory personnel actions against any employee who “discloses, or threatens to disclose to a supervisor or public body an activity, policy or practice of the employer that is in violation of the law, rule or regulation” that either “creates and presents a substantial and specific danger to the public health or safety, or … constitutes health care fraud.” Similarly, the Civil Service Law prohibits employers from retaliating against public employees who disclose violations to local, state or federal law, and Title VII of the Civil Rights Act protects employees from retaliation when filing an Equal Employment Opportunity Commission complaint or discrimination lawsuit.

Employees who want to blow the whistle on an employer’s illegal activities, or who have been discharged for doing so, should consult with an experienced employment law attorney who could help them make a protected disclosure or prepare a wrongful termination lawsuit.

Mathew B. Tully is the author of The Saratogian’s “Ask the Lawyer” column and the founding partner of the law firm Tully Rinckey PLLC in Colonie. Email employment law-related questions to askthelawyer@1888law4life.com. The information in this column is not intended as legal advice.

Tully Rinckey PLLC criminal defense attorney Derrick Hogan, Esq., answers listener questions on WGNA’s “Ask the Lawyer”. Mr. Hogan discusses charges of “theft of services” on a credit card, getting a class A misdemeanor reduced or dismissed and any recourse you may legally have against a child who commits arson on your rented home.

Tully Rinckey PLLC family and matrimonial attorney Barbara King, Esq., answered listener questions on WGNA’s “Ask the Lawyer.” Ms. King discusses filing for divorce when parties involved live in separate states, the legal options you have, if any when discovering that your spouse is still legally married to their ex and the recognition of Common Law Marriage in New York State.

]]>http://www.tullylegal.com/albany-ny/news/wgnas-ask-the-laywer-barbara-king-esq/feed/0Report Shows Upstate NY Is One of the Nation’s Best Places for Individual Debtors to Emerge from Bankruptcyhttp://www.tullylegal.com/albany-ny/news/report-shows-upstate-ny-is-one-of-the-nations-best-places-for-individual-debtors-to-emerge-from-bankruptcy/
http://www.tullylegal.com/albany-ny/news/report-shows-upstate-ny-is-one-of-the-nations-best-places-for-individual-debtors-to-emerge-from-bankruptcy/#commentsMon, 22 Sep 2014 16:38:23 +0000Tully Rinckey PLLChttp://www.tullylegal.com/albany-ny/?p=20650WNY District Has Nation’s 5th Highest Plan Completion Rate in U.S., NNY District Has 9th Highest Rate September 22, 2014 – ALBANY, N.Y. – New data from the Administrative Office of the U.S. Courts shows that Chapter 13 nonbusiness …

September 22, 2014 – ALBANY, N.Y. – New data from the Administrative Office of the U.S. Courts shows that Chapter 13 nonbusiness debtors in the two judicial districts located entirely in the region are experiencing greater success at emerging from bankruptcy. In fact, the U.S. Bankruptcy Court for the Western District of New York last year had the fifth highest Chapter 13 plan completion rate in the nation and the U.S. Bankruptcy Court for the Northern District of New York had the ninth highest rate, according to a Tully Rinckey PLLC analysis of the data in the Administrative Office’s 2013 Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) report.

Out of the 2,093 Chapter 13 cases closed in the Western District in 2013, 1,538 of them involved completed plans, resulting in a plan completion rate of 73.5 percent. That plan competition rate was up significantly from the region’s 2012 rate of 65.6 percent. The Northern District saw 1,600 completed plans out of 2,360 closed cases in 2013, representing a 67.8 percent plan completion rate, compared to 62.2 percent the previous year. The higher completion rates suggest debt-laden upstate New Yorkers are proposing and confirming Chapter 13 plans that they can perform and which still provide a fair return to creditors.

The two upstate districts’ plan completion rates in 2013 were also well above the average national rate of 45.2 percent. Only the U.S. districts of Vermont, Eastern Oklahoma, North Dakota, and the Northern Marianna Islands had higher rates than the Western District of New York. See chart. There are 94 federal judicial districts. At 12.5 percent, or one out of eight, the Central District of California had the nation’s worst 2013 plan completion rate.

“With three out of four Chapter 13 debtors in the Western District and two out of three in the Northern District successfully emerging from bankruptcy, a financial fresh start is clearly within reach in upstate, provided the debtors obtain experienced counsel who can help them propose a feasible plan that provides the required treatment of creditors’ claims,” said Tully Rinckey PLLC Senior Council Robert J. Rock, who has been practicing bankruptcy law throughout New York State for over three decades.

Under Chapter 13, debtors must pay back creditors in accordance to a court-approved plan of repayment. When a plan is completed, usually after three to five years, the Chapter 13 case is closed and the debtor is said to “emerge” from bankruptcy. But not all Chapter 13 debtors, however, get that far.

A failure to make plan payments is generally the most commonly cited reason for dismissal. In 2013, for example, 42 percent of case dismissals statewide were prompted by plan payment failures. Other reasons include exceeding the maximum five-year repayment period, failure to provide requested or required documents to the Chapter 13 trustee and court after plan confirmation (e.g., annual tax returns, proof of current income), and failure to disclose assets that later come to light.

Since the enactment of the Bankruptcy Abuse Prevention Consumer Protection Act of 2005, debtors whose income exceeded certain levels have been required to file for Chapter 13 instead of Chapter 7, under which creditors are generally repaid through the liquidation of assets. However, under Chapter 13 debtors may be able to save property that would have to be sold under Chapter 7, such as stocks, real estate investments and vehicles.

To speak with Robert Rock, or for more information, please contact James Schlett at (716) 439-4700 or at jschlett@1888law4life.com.